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Germany: Economy grows on the back of private consumption and avoids recession in Q3

November 25, 2014

In the third quarter, GDP rose a seasonally-adjusted 0.1% over the previous quarter according to more complete data published by the Federal Statistics Office (Destatis) on 25 November. The modest expansion followed Q2’s mild 0.1% contraction, which had marked the first drop since Q1 2013, helped the economy to avoid a technical recession. The reading matched the preliminary estimate and met market expectations. Compared to the same quarter last year, GDP increased 1.2% in Q3, which came in above the 1.0% expansion registered in the previous quarter.

The expansion was mainly driven by rising private consumption, which jumped from Q2’s 0.1% growth to a 0.7% expansion in Q3, recording the largest gain since Q3 2011. Government consumption also accelerated, rising from Q2’s 0.4% increase to 0.6% growth in Q3, the largest expansion since Q2 2012. The contraction in gross fixed investment softened from Q2’s 1.8% drop to a milder 0.9% contraction in Q3.

On the external front, exports of goods and services increased 1.9% in Q3, which came in above Q2’s 1.2% rise and marked the fastest expansion since Q1 2011. Imports growth strengthened from a 1.1% increase in Q2 to a 1.7% expansion in Q3. Consequently, the external sector’s net contribution to overall economic growth rose from Q2’s 0.1% to 0.2% in the third quarter.

The Bundesbank expects economic activity to increase 1.0% in 2015. For 2016, the Bank sees economic growth picking up to 1.6%. FocusEconomics Consensus forecast panelists expect economic activity to expand 1.5% in 2015, which is unchanged from last month’s forecast. For 2016, the panel forecasts GDP growth of 1.8%.